College tuition can be costly whether you are seeking an undergraduate and graduate degree, attending an out-of-state public university, or taking classes at a private university.
If you do not have adequate savings to pay for classes, room and board, food, travel and other necessities, then you may be considering how to pay for college.
The costs of attending college continue to rise each year for both public and private colleges and universities. The average tuition and fees at a public in-state college was $9,687 and at or private schools it $35,087 for the 2020-21 school year. Obtaining financial aid is one way students can afford to attend college.
One common type of financial aid is called gift aid and typically comes in the form of federal and state grants and a wide range of scholarships that are given by private donors, foundations, non-profit organizations and even the universities themselves.
These grants and scholarships do not have to be paid back, which is helpful for students who are on a tight budget or are considering obtaining a graduate degree.
Another type of aid is called self help aid and usually comes in a form of work study programs and student loans. Some work study programs are sponsored by the federal government and they provide part-time jobs for students who need help paying their tuition. These jobs can be either on the campus of the college or university or off campus nearby.
Self help aid also includes federal student loans which have to be paid back after a student graduates.
There are advantages and disadvantages of both gift aid and self help aid. Undergraduate and graduate students may only qualify for one type of aid, depending on their financial circumstances, where they are obtaining their college degree or other factors.
What Are The Pros and Cons of Gift Aid?
Grants and scholarships are considered gift aid. One common form of grants are called Pell grants. These are grants provided by the federal government and Pell grants are given to undergraduate students who have demonstrated financial need.
The maximum federal Pell grant award is $6,345 for the 2020–21 award year (July 1, 2020, to June 30, 2021), but amounts can change annually.
The main drawback of gift aid is that you may not know what amount you will receive and you may need to supplement paying for college by seeking more scholarships and grants or getting a part-time job.
If you received a Pell grant the previous academic year, there is no guarantee that you will receive it again for the next academic year.
There are thousands of scholarships that are available to students who are obtaining various degrees. There are a variety of scholarship databases where students can search to find scholarships.
The amount of money that you can receive from scholarships can range a couple thousand dollars to larger amounts that will cover the majority of your tuition and other costs.
Scholarships may require that you reapply annually and there is no guarantee that you will receive a scholarship again the following academic year.
What Are The Pros and Cons of Self Help Aid?
Self help aid includes both work study programs and federal and private student loans.
Work Study Program
Federal work study programs are available for both undergraduate and graduate students to help them pay for tuition and other educational costs. The program’s jobs are related to the student’s course of study and also include community service work.
Both full-time or part-time students may qualify for part-time employment while they are enrolled at their university or college and it is available to undergraduate and graduate and professional students who demonstrate financial aid.
The work study programs are operated by a college and university financial aid office and you will receive at least the federal minimum wage. These jobs are available both on-campus and off-campus which can be beneficial for students who do not have other means of transportation.
Students who work off campus typically work for a nonprofit organization or a public agency and the goal of the job is geared to be in the public interest. The number of jobs is limited, so students should apply early to ensure that they have a position for the following academic year.
Federal and Private Student Loans
Another type of self-help aid are federal and private student loans. Federal student loans are based upon the financial need of a student and their family. They are either subsidized or unsubsidized direct loans and may offer lower interest rates than private loans. One drawback is that the federal government will limit how much money you can borrow.
Undergraduate students may qualify for subsidized loans that are given based on their financial need. One benefit is that the federal government will pay the interest on these loans while you are attending school or at least taking classes half-time, during your grace period or when you have deferred the loan.
Both undergraduate and graduate students may qualify for unsubsidized loans and they are not based on financial need. These loans accrue interest while students are taking classes, during the loan’s grace period, or when you have deferred the loan.
Private student loans can be used to help make up the gap in what is needed to pay the remainder of tuition or living expenses. While both federal and private student loans may help students pay for their tuition; they must be repaid once a student graduates.
If you do not complete your course study and do not receive a degree, the student loans still have to be repaid.
Federal student loans have protections that private student loans do not offer. Students who have received federal student loans can seek several options after graduation to repay their loans including income-driven repayment programs.
Federal student loans also offer borrowers’ the ability to put loans in forbearance or deferment, allowing them to temporarily pause payments in certain situations.
Some borrowers will choose to refinance student loans into new private student loans. But this option means that you lose the protection of the federal repayment plans. Private student loans have both fixed and variable interest rates.
Fixed interest rates are beneficial for people who want to know the exact amount of their loans each month helping them to budget more easily. The interest rate on variable student loans are sometimes lower than fixed rates but that means your payment amounts can fluctuate from month to month.
Shopping around can help you find the best private student loan that fits your financial needs and the amount that you can repay each month.
Qualifying For Gift Aid or Self Help Aid?
Qualifying for either gift aid or self help aid might depend on your financial circumstances. Students may want to apply early for grants, scholarships, work-study programs and student loans.
The first step in applying for federal aid, such as the Pell Grant, work study, and federal student loans is completing a FAFSA®, or Free Application for Federal Student Aid. This application must be completed every year.
Some states and colleges may have their own FAFSA deadlines , so double check to avoid missing any. Missing a deadline can mean forgoing some financial aid.
While some gift aid such as scholarships are given to students based on merit, grades or other accomplishments, grants, work study programs and student loans are typically based on your financial needs and the cost of tuition at your university.
Some universities use data from the FAFSA to determine gift aid like scholarships too. Students can also apply for scholarships and grants that aren’t associated with the FAFSA®.
Private Student Loans with SoFi
In some cases gift aid and federal aid aren’t enough to help students pay for their tuition. In that case, some students may consider private student loans.
SoFi offers private student loans with no late fees or origination fees with flexible repayment options. There are also interest rate discounts for eligible SoFi members.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended to December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since in doing so you will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave up to $10,000 and $20,000 for Pell Grant recipients unrefinanced to receive your federal benefit. CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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